Friday, January 12, 2007

Cable Wars Continue

The greed dispute between Sinclair Broadcasting and Mediacom continues. It's already a national story. Soon, it may widen to other cable companies around the nation.

We've already explained the source of the dispute here. Essentially, what Mediacom cable viewers are experiencing is the bitter fruit of several decades of FCC and Justice Department policies that gave a green light to increased concentration of media outlets into the hands of fewer and fewer mega-corporations until each has acquired monopoly market power.

Broadcasters like Sinclair and cable companies like Mediacom aren't fighting over their own money; they are scavengers fighting over who gets how much of the carcass -- and the carcass is you.

Cable subscribers on Pensacola Beach, in Gulf Breeze, and in select beach areas to the west are missing out on ABC-TV network programs and the WEAR-TV (Channel 3) advertising fest that masquerades as broadcast news. Local channel 3 almost certainly is taking a large hit in advertising revenues. Cable penetration here is broad and deep. Since Sinclair cannot be assured that anyone in his right mind would go out of his way to watch Pensacola's only local network affiliate, stories abound that advertisers are bailing out on Sinclair or insisting on steeply reduced rates.

It appears to me that Sinclair Broadcasting Group is trying to double dip the public. Not only are they charging businesses for advertising on their networks; they want to charge the cable companies to send their channels on the cable system. This in turn, will increase cable bills.

(We pause to observe that, quite possibly, Mr. Obenour was writing, instead, to the "Zanesville, Ohio, Times-Recorder" or to "Camden Publications" in Michigan -- it's hard to tell since all these "local" newspapers are owned by Gannett Publications, which itself is an oligopoly.)

"I hope you can understand Sinclair's reluctance to agree to such an unusual approach to resolve what is essentially a disagreement on price in a commercial negotiation."

Smith is flat-out lying. Binding arbitration is not "unusual." Indeed, it was first suggested by the FCC over a month ago. It is, in fact, a common means for resolving business disputes at all levels, from customer service to business-against-business contract disputes, both within the regulated communications industry and elsewhere.

What's really afoot is that Sinclair doesn't really want a settlement with Mediacom. It is angling to try the same strong-arm tactics against much larger cable systems. Initially, Sinclair Broadcasting picked on Mediacom, hoping to establish a price precedent they might then use to extort money from larger cable companies. By standing its ground and delaying decision day, Mediacom hoped to shift the burden of dealing with the outlaw Sinclair Broadcasting corporation to another mega-corporation such as Time-Warner or Comcast.

But now the television networks themselves are trying to horn in on the action. Marketwatch reportsthat CBS president Leslie Moonves told Citigroup institutional investors earlier this week that by charging cable companies directly for network programs he expects by 2009 CBS will see "hundreds of millions" added to its bottom line. That would be in addition to the "hundred million" Sinclair's CEO told his investors he expects new fees to generate.

The network's tactic apparently is the same one Sinclair pioneered: pick on the little guys first, then climb the ladder to larger cable providers.

"We're also currently in negotiations with three of the smaller cable groups," said Moonves.

Inevitably, as we have said, the consumer will be the loser. Cable rates are sure to skyrocket. At best, we can hope the FCC modifies or eliminates the "must carry" and "re-transmission" rules to relieve cable companies of the unfair bargaining position they're in. At worst, it seems to us, cable companies eventually will have to re-configure their current "channel bundling" approach and move toward a true cafeteria plan where cable subscribers can pick and choose which channels they want to receive.

But don't hold your breath. Neither the FCC nor Congress shows any inclination to even the playing field they've tilted against cable companies. As long as the networks and broadcast monopolies like Sinclair continue to eye the cable consumer's flesh, looking for an extra meal to add to their bottom line, you can be sure cable television won't be getting any cheaper -- or better.

From a much broader perspective, all of this might be good. When cable gets too expensive and broadcast stations all descend to the miserable quality of Sinclair's properties, at long last Americans may revert to reading books for their entertainment and edification.

So how did we end up in this sorry state? In 2004, Congress effectively removed the ceiling on how many TV stations one owner could acquire nationally. * * * Sinclair now owns 58 TV stations that reach, the company claims, 22 percent of the U.S. population. Revenue from 58 stations allows Sinclair to go dark on cable systems here and there for the short term while arranging for big payoffs in the long term.* * *What Congress gives it can also take away. We should insist that the new Congress review Sinclair's extortionate behavior in Des Moines and other similar attempts by broadcasters to "double dip" in local TV markets. The change Congress made in ownership rules allowed big station groups with distant management to insulate themselves almost completely from any kind of accountability to viewers and the communities in which they live.

It's time to restore that accountability by dusting off the "public interest, convenience and necessity" clause in the Telecommunications Act to measure over-the-air, satellite and cable-TV service.